QuanTek Econometrics Software

Model Portfolio

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Warning:
The Price Projection represents the
expected N-day prices.The error bars represent the
expected N-day price range. These are
estimates only. It is entirely possible for prices to end
up outside the expected price range at any time.

It should
be emphasized that the Price Projection cannot predict
every short-term fluctuation in prices. It is based on past prices only,
and cannot anticipate exogenous events such as news
events that influence prices. However, it seems to give predictions
that are at least plausible, and over a long-term average (1024 days
or 4 years), yield significant correlation with future returns,
according to the correlation tests.

Dow Industrials (.DJI) (2019-01-18)

Here is the latest shot of the Dow Jones Industrials
(.DJI), on Scale 8. The
support/resistance level at Dow 24,000 is
shown as the green line. This shows the recent selling
climax in December 2018:

Here is another shot of the Dow Jones Industrials
(.DJI), on Scale 4. The
support/resistance level at Dow 24,000 is
shown as the green line. This shows the sell-off
from the beginning of October to the end of December of 2018:

Here is another shot of the Dow Jones Industrials
(.DJI), on Scale 2. The
support/resistance level at Dow 24,000 is
shown as the green line. This view shows how the Dow 24,000
level was a support level until recently:

It appears that the selling climax of the past
few weeks has finally completed after a brief pause at the
Dow 24,000 support/resistance level. The green
horizontal line at the Dow 24,000
level was the previous support level, and for a
week or so served as a resistance level. But
finally this week the Dow broke through this level,
so hopefully it will be a support level once more.
The first graph shows the short-term action over the past week. The
third graph shows the longer-term action over the past year or so,
showing how the same Dow 24,000
level was a support level back in February through
July of 2018.

The second graph shows the recent sell-off that
occurred over the last three months. It is curious why this
occurred. The logical explanation is the unfavorable news
events, culminating in the government shut-down
that is still ongoing. The economy appears to be strong and stocks are not
over-valued at this point. But investors seem to be increasingly
afraid of dysfunction and chaos in
the government -- hence the selling climax of the previous
month.
If there is any more political turmoil coming out
of Washington, this could well send stocks lower
again. However, there is another interpretation of this
sell-off. There has been increasing talk that the
bull market is getting old and we are due for another
bear market. It is the fear of a bear
market that may have spooked the market and caused the
selling climax. However, the market seems to have
discounted this idea and all the bad news
events coming out of Washington, and is
now headed higher again. So maybe the sell-off from
October through December, 2018, was itself the long-awaited
bear market. Maybe now that the market has shaken off all
the bad news, it is ready for another upleg.
According to the graphs, the market has now returned to its normal
long-term trend line.

On the other hand, there is a darker possibility. If the turmoil
in Washington continues, it could be a repeat of
the situation in 1974 in which there was a steep
bear market. This coincided with the unfolding
Watergate scandal and impeachment
of President Richard Nixon, after years of unrest
and conflict due to the Vietnam War. Really, I
think the current situation is merely a pale reflection of that era,
in which the conflicts and tensions were real and serious. But if
the current situation continues to unfold and becomes more serious,
it could have a similar effect on the markets.

The
selling climax was actually an interesting situation, because the price
action as the market was headed lower was unpredictable. The
situation with the prices sharply below the mean price
levels and headed down, represents a direct conflict
between the two types of market correlations,
namely the trend persistence, which should cause
the prices to trend sharplylower,
and the return-to-the-mean, which should cause the
prices to reverse and trend sharplyhigher.
At some point the latter mechanism starts to dominate over the
former, and at that point the prices reverse sharply. You can
see that this happened already twice previously in the recent past, once at the
end of October and again near the end of November. This time the
reversal was sharper than before. It resulted in a
selling climax, which occurs when panic selling
drives prices more and more sharply lower, so that fear
dominates and builds upon itself, then suddenly greed
takes over and prices rebound just as sharplyhigher. But the exact
point at which this occurs is essentially unpredictable.

Much of this behavior seems to be caused by program
trading. The programs sell on the way down
and then buy on the way up, which creates a
positive feedback loop, leading to instability in the
market. This is not such a good idea -- if ordinary traders try to
do it, they will probably lose money because they will be too late.
A better idea is buy-low, sell-high, which creates
a negative feedback loop and makes the market more
stable.

Note that the Price Projection can't predict the
short-term selling climax, even though we can do it
ourselves to some extent. The Adaptive Filter is a
Least-Mean Square filter which responds mainly to
the long-term trend. This results in a prediction
that resembles very closely that of the Random Walk
model, which predicts the long-term trend no matter
what the price level. (Of course, it is not clear which
long-term trend the Random Walk model is
supposed to predict.) There is just not enough data in a
short-term anomaly for the filter to establish a
correlation in the data, given the long-term trend
which is very well-established (in the case of an
index). The correlation in the
long-term trend overpowers that in any
short-term anomaly. So, unless the market becomes grossly
over-valued or under-valued, we
can expect it to return quickly to its long-term trend.

I think what we are seeing, longer-term, is a return to a more
normal market, as the fiscal stimulus and
low interest rates are gradually removed by the
Federal Reserve. This, coupled with the political
uncertainty, has been causing increased volatility
over the past few months. (I think the uncertainty
over our trade relations is also having an effect.)

Portfolio Report (2019-01-11)

The Optimal Portfolio we are tracking for this week
is displayed in the following QuanTekReport file:

The Model Portfolio this week is showing a
profit once again. This is mainly due to gains in Facebook,
Tesla, and Boeing. The other
stocks are still below their basis price. But they will probably
recover shortly once the market is fully recovered from the recent
sell-off. Hopefully there will be no more shocks to
the market, and all of these securities can resume their
up-trend.

I don't see any good buy opportunities this
week. I am tempted to buy Amazon, due to its
favorable Price Projection. However, it looks like
it might be poised for another short-term down-trend.
So I will wait for the next pull-back to
buy this one. Netflix had a very
impressive jump upward this past week. But now it is too
high-priced, and poised for a posible short-term down-trend.
Also it has a slightly negative Price Projection.
So maybe it will be a good buy on the next
pull-back.

Portfolio Securities (2019-01-11)

Here are some screen shots of the QuanTekMain Graph for the Standard & Poors 500
(.SPX). These illustrate the recent selling climax
within the context of the long-term trend of the
S & P 500 index, on three different scales.

Also shown are some screen shots of theQuanTek
Splitter Windows for the Standard & Poors 500
(.SPX). The first two
Splitter Windows represent three different
Indicators, with low-pass smoothing and
band-pass smoothing. The third Splitter
Window shows the output of the Adaptive Filter
directly and associated indicators:

In the first two Splitter Windows,
the three indicators shown are Relative Price,
which is the price action relative to the 512-day
smoothing curve, the Velocity, which is the
returns or daily price differences, and the
Volatility, which is the absolute deviation of the daily
returns. All of the indicators are smoothed using
N-day Wavelet Smoothing, and they are all
causal (except the Range and
Threshold lines themselves, which depend on taking an
average over the whole indicator).The most important indicator in
each case is the Relative Price. The
Volatility indicator is relative to zero for
Low-Pass Smoothing, but relative to its mean value for
Band-Pass Smoothing.

Fig.1 .SPX-Standard & Poors 500 (Scale 8):
This graph on Scale 8 shows the recent
selling climax of the past several weeks. It made a
partial, but not complete, recovery back to previous price levels.
It appears that the recovery hit resistance at a
price level about equal to the previous support
level. This is probably due to the ongoing political turmoil
coming out of Washington, and in particular the
government shutdown, which tonight has become the
longest in US history. The prices appear very oversold,
being quite a bit below the Bollinger Bands.
Hopefully if, and when, the political turmoil
subsides, maybe the index will recover back to its long-term
trend. However, note in this graph that QuanTek
is giving a Buy Signal (green rectangles). This
comes from the Relative Price (Low-Pass) Indicator (Fig.4)
being below the Range setting, while the
Adaptive Filter Output (Fig.6) is positive.
In fact, the Adaptive Filter Output (Fig.6) is also
above its Threshold setting, so it is also giving a
Long Signal (not shown on this graph).

Fig.2 .SPX-Standard & Poors 500 (Scale
4): This graph on Scale 4 gives a little
more historical perspective. Once again, the selling climax
is below the outer Bollinger Band, which follows
the 512-day S-G Smoothing Curve, indicating an
oversold condition. Previous to that the index
appeared a little overbought. On this graph are
also indicated some Buy Points. These indicate
inflection points in the Relative Price
(Band-Pass) Indicator (Fig.5), as can be seen in
Fig.5. These Buy Points are indicated by
vertical green lines in all the Indicator graphs
and green arrows on the Main Graph. They are
triggered when the Relative Price (Band-Pass) Indicator
(Fig.5) goes through a minimum outside the Range
setting, while the Adaptive Filter Output (Fig.6)
is positive. They indicate possible favorable
buy points in case you want to time
your trades, or possibly for swing trading.
(Analogous statements apply to the red Sell Points.)

Fig.3 .SPX-Standard & Poors 500 (Scale
2): This graph on Scale 2 gives even more
historical perspective. Also this graph is plotted relative to the
2048-day (robust) Trend Line. Relative to this
long-term Trend Line the selling climax
still appears to be an oversold condition. As of
now, the prices have recovered back to the outer Bollinger
Band, which this time follows the 2048-day Trend
Line. In all these graphs, it can be seen that the
Price Projection has latched on to the
well-established long-term trend and is following it
closely. It was not even significantly affected by the
sell-off. This should be a reflection of the fact that the
sell-off was just a short-term anomaly,
due to exogeneous news events, which from the
long-term perspective is just a minor feature of
the graphs. Almost the opposite type of anomaly occurred in January,
2018 when the market became overbought for a few
weeks, then recovered. From past experience we can infer that the
market will probably recover and resume its upward trend within the
Bollinger Bands, in a few months time.

Fig.4 .SPX-Indicators (Low-Pass
Smoothing): These indicators are smoothed using
Low-Pass Smoothing, similar to a moving average. The bottom
indicator is Relative Price, and it serves as an
indicator of overbought/oversold conditions. It can
be seen that for the past couple of years, the indicator has been
relatively flat, indicating that prices have stayed close to their
long-term trend line. Recently, however, prices
have entered an oversold condition, triggering a
Buy Signal. The Range control sets the level at which
Buy/Sell Signals are triggered. Note also the
increased Volatility.

Fig.5 .SPX-Indicators (Band-Pass
Smoothing): These indicators are smoothed using
Band-Pass Smoothing, similar to the difference of two
moving averages. The bottom indicator is Relative Price,
and it serves as an indicator of N-day inflection points,
similar to an oscillator indicator.
These are shown on the graphs as the N-day Buy/Sell Points.
With the recent downturn, it can be seen that this indicator shows a
strong Buy Point. The Range
control also sets the level at which the Buy/Sell Points
are triggered. Actually, we don't use these Buy/Sell Points,
but they are convenient for lining up features on the graphs. They
might be useful for N-day Swing Trading, however,
if you are downloading data every day.

Fig.6 .SPX-Adaptive Filter Output:
These three indicators pertain to the Adaptive Filter.
At the bottom is the raw output of the filter. Green indicates a
positive expected return and red indicates a
negative expected return. This indicator forms the
basis of the Long/Short Signals. The
Threshold control sets the level at which the
Long/Short Signals are triggered. It can be seen
that up to the present time, the Adaptive Filter
has been giving a strong positive signal, which is a long
indication. The middle indicator is the actual
N-day 'future' returns which is the "desired
output" of the Adaptive Filter. It can be seen that
most of the short-term fluctuations are just stochastic noise and
are not picked up in the filter output. This is also due to the fact
that the LMS filter is a low-pass filter.
The upper graph is the actual expected return due
to the 2048-day long-term trend, extended into the
future. It can be seen that the Adaptive Filter
output resembles this long-term trend much more
closely than it does the "desired output" that it is trying to
mimick. However, it is not exactly the same, and under favorable
conditions the Adaptive Filter can exceed the
performance of the long-term trend. (The
long-term trend is pretty good, however, over the
long-term.)

Portfolio Report (2019-01-04)

The Optimal Portfolio we are tracking for this week
is displayed in the following QuanTekReport file:

I don't see any good buy opportunities this
week. Netflix might be a good buy eventually, but
for the moment its Price Projection is still
negative. It just had a sudden spike upwards, but this has happened
four other times in the past couple of months, and was followed
immediately by a steep decline. The trend since last June has been
negative, so it might be better to wait until an
intermediate-term uptrend is established. It is a similar
story for Amazon and Alphabet. It
might be best to wait until the government shutdown
ends and the political uncertainty subsides a bit.
However, our previous stock picks seem to have been pretty good.
They seem to have weathered the storm pretty well -- the portfolio
is down less than 2%, in spite of all the carnage.

Portfolio Securities (2019-01-04)

Here are some screen shots of the QuanTekMain Graph for various securities in the Optimal
Portfolio:

Fig.1 .GSPC-Standard & Poors 500 (Scale 8): Here
is a screen shot of the S & P 500 showing, once
again, the selling climax of the past couple of
weeks. The light blue line is drawn at the S & P 500 2600
level, which seems to be the previous support level. Note the
buy signals denoted by the green rectangles. The
pattern did not make it quite back to the previous support level,
unfortunately. I surmise this is due to the ongoing
political uncertainty due to the government
shutdown and related problems, and probably also all the
talk about impeachment. But the index was up on
Friday due to a better than expected employment report. The market
will probably do better once all the turmoil ends,
and I expect it to remain in a trading range for a
year or two. Maybe then it will start a new upleg
again due to new industries on the horizon, such as
artificial intelligence, big data, automation, self-driving cars,
clean energy, etc. My theory is that we are at the
beginning of a new generational economic cycle that
began around 2015, and this will power the next
upleg in the market. (Of course, it is "only a
theory"...)

Fig.2 AAPL-Apple Inc. (Scale 4): This shot shows
the breakdown in Apple over the past couple of
months, since the end of October. This seems to be due to lowered
expectations for sales of the iPhone. In
particular, the breakdown in the last couple of days was due to a
news report of lowered expectations for iPhone
sales in China. To me this seems overblown and
Apple should recover from this bad news, hence now
looks like a good buy opportunity. (Note the
Buy Points indicated by the green arrows.) But the
stock looked rather overbought from August through
October, and now it is oversold, so I expect it to
return to its long-term trend once the market
discounts all the recent bad news events.

Fig.3 AMZN-Amazon.com Inc. (Scale 4): The graph
of Amazon actually does not look too bad at this
point. The Price Projection indicates a
32-day return of 24.00%. (Note that it was
previously negative, a few weeks ago.) However, since September the
stock has been in an intermediate-term downtrend,
and if this patter were to continue it would be at a
short-term peak right about now. It looks susceptible to
more bad news over the short-term. However, for a
long-term investor, now might be a good buy
point. Given the strong long-term uptrend for this
stock, it appears that the Price Projection has
estimated that the positive return to the mean is
stronger than the negative intermediate-term trend
persistence (although it helps that the short-term
trend is strongly positive). A week ago would have been a
better buy point.

Fig.4 AMZN-Amazon.com Inc. (Scale 2): On this
scale, the Bollinger Bands are drawn with respect
to the 2048-day trend-line rather than the
512-day Smoothing Curve as on Scale 4.
With respect to the long-term trend-line, the
perspective looks a little different. From this perspective, it
looks like Amazon was very overbought
starting in January, 2018. It reached a peak in September, then
broke down in the sell-off that started in October.
But the recent selling climax of the past couple of
weeks merely put Amazon back on the yellow
trend-line once more. In other words, Amazon
has merely corrected back to the price level where it should have
been, if it had not become so overbought during
2018. Perhaps this is the case for the market as a whole, in which
case the sell-off was merely a healthy
correction back to reasonable valuations.

Fig.5 MRK-Merck & Co., Inc. (Scale 4):
Merck has barely been affected by the downturn in the
FANG and tech stocks over the past
several months. It has been in a healthy uptrend
since last Spring. It was also barely affected by the
selling climax of the past couple of weeks. However, at the
moment it appears somewhat overbought, at the upper
range of its Bollinger Bands. Although probably a
good long-term buy, at the moment it appears a
little expensive. As a rule of thumb, I like to buy
below the yellow curve, and sell above the yellow
curve. The fact that Merck appears so favorable at
the moment might mean it is near a good sell point,
if an investor wanted to take some profits (and the market as a
whole were at a sell point, which it isn't).

Fig.6 TGC-Tengasco Inc. (Scale 4):
This is an oil/gas company, and it serves as an example of a very
risky security. Note the extremely wide Bollinger Bands.
You might not notice how risky this stock is, if you were to see a
normal graph of it in isolation. The QuanTek
graphs are all on the same (logarithmic) scale, so you can
immediately notice the wide Bollinger Bands and
wild behavior compared to other stocks. The most recent price was
$0.99, so this qualifies as a borderline "penny
stock". Typically, the lower the price, the greater the percentage
swings in price, and the greater the risk. This is
immediately visible on the logarithmic scale, which shows percentage
changes. Note also the corresponding very wide Error Bars
on the future Price Projection. You may not want to
own this stock unless you are a real risk-taker!

Portfolio Report (2018-12-28)

The Optimal Portfolio we are tracking for this week
is displayed in the following QuanTekReport file:

The market seems to have turned a corner, so it looks like a good
buy opportunity right now. Actually, it would have
been even better last Friday when the outlook appeared so gloomy.
However, I wanted to wait until it actually turned the corner and
started to exhibit upward momentum. I decided to
buy 200 shares of TSLA at the close price on
Friday. This is a somewhat risky stock, but had a good
long-term expected return and Sharpe Ratio
of 111.47%, and expected 32-day
(annualized) return of 51.87%, according
to the Price Projection. Some of the other stocks
that might be good buys due to their low price, had a negative
expected return, so TSLA was the
best choice for now. Also this choice provides a little more
diversification.

Portfolio Securities (2018-12-28)

Here are some screen shots of the QuanTekMain Graph for various securities in the Optimal
Portfolio:

Fig.1 TSLA-Tesla, Inc. (Scale 4):Tesla
was my buy choice for this week. It has not
suffered from the intermediate-term down-trend like
many of the other securities, and the 32-day Price
Projection is a very healthy 51.87% (annualized).
This is to be contrasted with its long-term trend
line which is giving a healthy 50.13% return. So
the Price Projection coincides in this case with
the prediction of the Random Walk model. This is a
somewhat risky stock, with wide Bollinger
Bands. There is no clear intermediate-term trend
evident, which explains why the Price Projection
has latched on to the long-term trend as the
dominant trend. It appears that I got this stock at
a good price, and after riding out the volatility
it should give a robust long-term return.

Fig.2 NFLX-Netflix, Inc. (Scale 4):
Netflix is a stock that I was considering for a buy
at this time, since the price is down, but decided against it
because the Price Projection is negative at
-13.04% (annualized). This is to be contrasted with its
long-term trend line which is giving a healthy
50.20% return. Netflix reached a
peak in June and has been in a strong intermediate-term
down-trend since then. Also notice that this is a rather
risky stock with wide Bollinger Bands.
So apparently the intermediate-term down-trend has
overpowered the long-term up-trend in this case, as
well as the return to the mean. The prices are
still within the Bollinger Bands, so this is not a
serious breakdown, but nevertheless I will wait until a positive
Price Projection before I buy this stock.

Fig.3 FB-Facebook, Inc. (Scale 4): This was one
of our recent buy selections, and it appears to
have been a good choice. Facebook appears to be
trying to recover from its dramatic down-trend
starting with a serious gap in July, and establish
a new up-trend. It seems to have shown some
strength in the face of the recent sell-off of the
past couple of weeks. This is reflected in the Price
Projection, in which the return to the mean
mechanism has dominated over trend persistence. In
fact the Price Projection for FB
corresponds more or less to its rather healthy long-term
trend of 37.21%, so it is actually taking
a neutral position, just as the Random Walk
model would predict.

Fig.4 MSFT-Microsoft Corporation (Scale 4): Microsoft
appears relatively healthy, with only a small breakdown over the
past couple of months. Even during the sell-off of
the past couple of weeks, it stayed within its Bollinger
Bands. So the Price Projection predicts a
continuation of the ongoing intermediate-term up-trend,
and in fact this should surpass the long-term trend.
Apparently we have a return to the mean mechanism
at work, after the recent sell-off.

Fig.5 AAPL-Apple Inc. (Scale 4): This graph
shows the major breakdown in AAPL since the middle
of October, but it is not as bad as it seems, since AAPL
started out very overbought to begin with. Now it
is very oversold, but has not completely departed
from the range of its Bollinger Bands (compare with
GE). The Price Projection,
according to trend persistence, should be strongly
down, but according to return to the mean, should
be strongly up. In fact, it appears to be somewhat neutral,
corresponding to the average long-term trend. This
is just the prediction that the Random Walk model
would give. So either the Price Projection is
conflicted between the two correlation mechanisms,
or else it has latched on to the long-term trend,
which in this case is very well established. Just as in the case of
the Dow or other indexes, the long-term
trend is very well established, and it is hard to believe
that AAPL will stay depressed for very long. It
will have a tendency to return to its long-term trend,
which is what the Price Projection shows.

Fig.6 GE-General Electric Co. (Scale
4): Here is an example of a stock with a very abnormal
breakdown. The price action for GE
has broken down badly, having declined by over 50% in the month of October
alone. The 512-day smoothing curves are curved up because,
after the end of the past data, these curves are trying to make it back
to the 2048-day long-term trend curve, which is far above. Notice that
the Price Projection has a strong negative slope, indicating
trend persistence, corresponding to the
intermediate-term down-trend that has been in place since
October. The Price Projection could just as easily
have had a strong positive slope, indicating return to the mean,
since prices are so far below their trend-lines. So this represents
another conflict between the two correlation
mechanisms, and in this case the trend persistence
won. If the return to the mean mechanism starts to
win, according to the Price Projection, then it
will be a good time to buy this security.

Portfolio Report (2018-12-21)

The Optimal Portfolio we are tracking for this week
is displayed in the following QuanTekReport file:

This week I was too disheartened to buy an
stocks. I have decided to wait until the market seems to have found
a new support level or turns back to an uptrend. Now might be a good
buy opportunity, however, for a long-term investor.
I would rather wait for some sign of an intermediate-term uptrend.
In particular, I would like to wait until these political
events find some resolution. I am sure many other people
feel the same way -- investors hate the political
uncertainty that has been going on the past few months.

I was thinking about buying GE
at a bargain-basement price. Even though it has been showing some
signs of life, it still has a very negative expected return
according to the Price Projection (just like
several weeks ago). I have not heard any rumors that GE
is going bankrupt -- that would be unbelievable. So at some point it
would have to recover in the market and start heading up. Maybe it
would be better to wait until the full story becomes more clear, and
the stock is clearly established in an uptrend.

Portfolio Securities (2018-12-21)

Here are some screen shots of the QuanTekMain Graph for the S & P 500 on
various scales:

Fig.1 .SPX-Standard & Poors 500
(Scale 4): This screen shot of the S & P 500
looks very much like that of the Dow Industrials.
In this shot there is a clear support level at
about the 2630 level which was badly violated this
week. This is the support level that was
established in a similar sell-off that occurred
earlier in the year, back in February and March, 2018. Probably,
this support would not have been violated, had it not been for the
alarming political news that occurred (including
the government shutdown).

Fig.2 .SPX-Standard & Poors 500
(Scale 4): Here is another shot of the S & P 500,
this time spanning the time interval from July, 2015 to August,
2016. (Note that this is part of the same graph, which spans 8 years
continuously.) Here you can see a couple of other sell-offs
that occurred, one in August to September 2015, and one in January
to February, 2016. Each sell-off occurred with
increased volatility. Notice that about a month
later, the prices had recovered to their previous long-term
trend values, with low volatility. So in
each case, the sell-offs merely represented a good
buy opportunity.

Fig.3 .SPX-Standard & Poors 500
(Scale 2): This is a shot of the S & P 500,
on a smaller scale. This scale shows the 2048-day trend line,
which indicates that the average annualized return
of the S & P 500 over the past 2048 days
(8 years) has been 11.37%. On this scale you can
see the recent sell-off, and the sell-offs
in late 2015 and early 2016, together on the same graph. They don't
look a whole lot different, except for this past week which was a
little more serious. But in all previous cases, the market recovered
quickly, and the sell-offs were really
insignificant compared to the long-term secular trend.

Fig.4 .SPX-Standard & Poors 500
(Scale 2): This is another shot of the S & P 500,
on the same smaller scale. This shot shows the other half of the
graph, starting 8 years ago in November
2010. Notice the rather serious sell-off in August and September of
2011. In that case, the market found support and then recovered
completely in a few months. As in the other sell-offs,
this one represented a good buy opportunity. Notice
the shapes of the price dips during the sell-offs,
with their sharp reversals. The last dip, in particular, has the
characteristics of a selling climax. There are at
least five dips, all testing the same support
level.

Fig.5 .SPX-Standard & Poors 500
(Scale 1): This is another shot of the S & P 500,
on the smallest scale. This graph, with one pixel per day, gives the
panoramic long-term view of the price graph.You can see how "tight"
the graph of the S & P 500 is, and that these
sell-offs we have seen appear merely as tiny
"blips" on the overall long-term secular trend.
Nevertheless, it can be seen that there are long-term
fluctuations above and below the 2048-day
trend line, which indicates that a buy/sell
strategy based on these long-term fluctuations
might be profitable. But these are precisely the long-term
fluctuations that are captured by the Price
Projection.

Fig.6 .SPX-Standard & Poors 500
(Scale 1): This is another shot of the S & P 500,
again on the smallest scale, showing the other half of the same
graph. Again we have a sell-off early in 2011,
followed by about four years of a steady bull market
up to the beginning of 2015. It can also be seen that the
sell-offs in these graphs seem to be preceeded by a clear
overbought condition, so a profitable trading
strategy might be to sell in these
overbought conditions, and buy in the
oversold conditions after the sell-off.
Of course, the long-term secular trend outweighs
the overbought condition, so it might be better
just to buy and not to sell the
index.

Portfolio Report (2018-12-14)

The Optimal Portfolio we are tracking for this week
is displayed in the following QuanTekReport file:

This week I decided to take advantage of the
market sell-off to buy (at the close price on Friday) 400 shares of BA
(Boeing), which seems to be doing well according to the
Price Projection, and with a Sharpe Ratio
of 109.32%. We now have 5 securities in the
Model Portfolio. Facebook is up nicely for
the week, and Microsoft is also up. JP
Morgan is down slightly, but Apple is down
substantially. Since Apple is still a great
company, probably what has happened is that people are over-reacting
to projections that iPhone sales will slow down next year. So I have
no doubt that Apple will recover and resume its
upward trend eventually, although perhaps a little flatter than
before. Really, I think all these are great companies, purchased at
favorable prices, so they should all do well in the coming months
(as soon as people stop being so pessimistic).

Portfolio Securities (2018-12-14)

Here are some screen shots of the QuanTekMain Graph for various securities in the Optimal
Portfolio. These are an expanded shot of the Dow,
together with the 5 securities in the Model Portfolio
so far:

Fig.1 .DJI-Dow Industrials (Scale 4):
Here is an expanded screen shot of the Dow Industrials,
with a horizontal line drawn at Dow 24,000. It can
be clearly seen that this is an approximate support
level, and the Dow is flirting with this level that
it last reached back in March and April, and again at the start of
July. Several Buy Points are clearly indicated at
these levels. From a longer-term perspective, this looks like normal
behavior, not the start of a "crash". So it would not be surprising
if the Dow bounced off this support level and
started a new upleg. Maybe there is a "Christmas rally"
in store for investors after all!

Fig.2 AAPL-Apple Inc. (Scale 4):
It looks like AAPL has had a very bad month in
November. However, it is still above the levels reached last April,
which again seem to form a support level. The recent fall in
AAPL does not look so bad when it is observed how
overbought it was from August through October. Now it
appears oversold. Hopefully it has found
support at last and is setting up for a "Christmas
rally".

Fig.3 MSFT-Microsoft Corporation
(Scale 4): It looks like MSFT has held up
pretty well in this market downturn. Normally I do not like to buy
above the yellow trend curve, but in this case the Price
Projection is favorable, as is the Sharpe Ratio.
Hopefully Microsoft will remain strong due to its
rapidly growing cloud business. In fact, I like to
think that 2015 marked the start of a new
long-term economic cycle for tech (but
that is just my view).

Fig.4 FB-Facebook, Inc. (Scale 4):Facebook has had some rough going since mid-July,
when it experienced a large "gap" (presuming this is not just a data
anomaly-- unbelievable!). It has been in the news lately due to the
revelations of mismanagement of user data. The stock was punished up
through mid-November, but appears to be making a comeback over the
past 3 weeks or so. So it looks like I got a bargain. Surely this
company will remain a pivotal tech company, and so
I expect it to return to its former upward trend sooner or later.
Notice that the Bollinger Bands are widely spaced
compared to many older companies, which indicates that it is
relatively volatile (hence risky).

Fig.5 JPM-JP Morgan Chase & Co.
(Scale 4): It appears that JP Morgan has
experienced a downturn over the past week or so, right after I
bought the stock. I am not quite sure why. It should benefit from
rising interest rates. Maybe the economy appears to be turning down,
so interest rates may not rise quite so fast. Anyway, the downturn
does not appear serious, and this looks like a good, stable stock
for the portfolio. Probably fears of an economic downturn and
immanent recession are overblown.

Fig.6 BA-The Boeing Company (Scale
4): This looks like a good buy point for Boeing.
Notice the indicated Buy Points on the graph, and
the favorable Price Projection. Probably the recent
news of a software glitch in the 737 has caused the current dip in
price. But for the long-term the outlook appears bright for this
stock.